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Press release from PR Newswire

ATK Reports FY13 Second Quarter Operating Results

Thursday, November 01, 2012

ATK Reports FY13 Second Quarter Operating Results07:00 EDT Thursday, November 01, 2012ATK Board of Directors Declares 30 Percent Increase to Quarterly Dividend ATK Increases FY13 Full-Year Sales, EPS and Free Cash Flow GuidanceARLINGTON, Va., Nov. 1, 2012 /PRNewswire/ -- ATK (NYSE: ATK) today reported operating results for the second quarter of its Fiscal Year 2013, which ended on September 30, 2012. Orders for the quarter were $1.3 billion, representing a book-to-bill ratio of more than 1.2, driven by strong orders across all business groups. Second quarter year-over-year sales were down 4 percent at $1.1 billion. Excluding sales related to the Radford Army Ammunition Plant (RFAAP) and the absence of a favorable contract resolution in FY12, both within the ATK Defense Group, sales increased 2 percent to $1.1 billion compared to $1.0 billion (see reconciliation table for details). Margins of 10.3 percent in the second quarter were down compared with the prior-year quarter at 13.3 percent. Excluding sales and associated profit from contracts at RFAAP and the absence of the favorable contract resolution, FY12 second quarter margins as adjusted were 11.5 percent (see reconciliation table for details). Margin rates were primarily impacted by increased pension expense and sales mix in the ATK Defense Group in the current period. Net income for the quarter was down 19 percent to $65 million compared to $80 million in the prior-year quarter. Fully-diluted earnings per share were $2.00 compared to $2.43 in the prior-year period. Excluding sales and profit relating to RFAAP, the absence of the prior-year contract resolution, loss on early extinguishment of debt, and the favorable settlement of the IRS audit of the company's FY09 and FY10 tax returns, as adjusted fully-diluted EPS was $1.86 compared to the prior-year quarter of $1.92 (see reconciliation table for details). Second quarter results included key strategic contract wins such as the continued operation and maintenance of the Lake City Army Ammunition Plant, a contract for full-rate production of the Advanced Anti-Radiation Guided Missile, engineering and development as part of the Advanced Concept Booster Development for NASA's Space Launch System, and expanded aerostructures programs. "We're pleased by the strategic programs we've secured in the quarter across all of our business groups, reflecting our commitment to provide affordable, innovative products to our customers," said Mark DeYoung, President and Chief Executive Officer.Based on this increased confidence, ATK's Board of Directors has declared a 30 percent increase in its quarterly cash dividend to $0.26 per share. The dividend will be payable December 13, 2012, to stockholders of record as of November 21, 2012. SUMMARY OF REPORTED RESULTSThe following table presents the company's results for the second quarter of the fiscal year, which ended September 30, 2012 (in thousands).Sales:Quarters EndedSix Months EndedSeptember 30, 2012October 2, 2011$ Change% ChangeSeptember 30, 2012October 2, 2011$ Change% ChangeAerospace Group$ 310,298$ 332,657$  (22,359)(6.7)%$     604,954$   686,305$(81,351)(11.9)%Defense Group484,133528,104(43,971)(8.3)%998,6131,020,453(21,840)(2.1)%Sporting Group275,356248,65726,69910.7%548,522477,91570,60714.8% Total sales$ 1,069,787$ 1,109,418$ (39,631)(3.6)%$  2,152,089$ 2,184,673$(32,584)(1.5)%Income before Interest, Income Taxes, and Noncontrolling Interest (Operating Profit):Quarters EndedSix Months EndedSeptember 30, 2012October 2, 2011$ Change% ChangeSeptember 30, 2012October 2, 2011$ Change% ChangeAerospace Group$     37,077$     37,673$     (596)(1.6)%$    72,028$  80,219$  (8,191)(10.2)%Defense Group64,54692,911(28,365)(30.5)%155,907154,6951,2120.8%Sporting Group25,13323,3301,8037.7%45,92752,650(6,723)(12.8)%Corporate(16,199)(6,508)(9,691)(148.9)%(32,617)(9,618)(22,999)(239.1)%Total operating profit$   110,557$   147,406$ (36,849)(25.0)%$    241,245$ 277,946$(36,701)(13.2)%SEGMENT RESULTSATK operates in a three business group structure: the Aerospace Group, the Defense Group and the Sporting Group. AEROSPACE GROUPSecond quarter sales declined 7 percent to $310 million compared to $333 million in the prior-year quarter. The decrease primarily reflects lower NASA revenue in the space systems operations division and lower revenue in commercial aerospace structures.Operating profit in the quarter decreased 2 percent to $37 million compared to $38 million in the prior-year quarter, reflecting reduced sales as noted above, partially offset by improved operating performance in the space components division.DEFENSE GROUPSales in the second quarter fell by 8 percent to $484 million compared to $528 million in the prior-year quarter. Absent sales related to RFAAP and a favorable contract resolution in the prior year, sales were up 5 percent (see reconciliation table for details), driven by increased sales volume in the small caliber systems division, partially offset by lower sales in the armament systems division due to completion of an international contract. Operating profit for the quarter declined by 31 percent to $65 million compared to $93 million in the prior-year quarter. Absent sales and profit related to RFAAP and a favorable contract resolution, adjusted profit was down 2 percent (see reconciliation table for details), driven by sales mix change primarily due to completion of an international contract noted above. SPORTING GROUPSecond quarter sales increased by 11 percent to $275 million compared to $249 million in the prior-year quarter. The increase in sales was driven by higher volume in both the ammunition and accessories divisions.Operating profit in the second quarter increased by 8 percent to $25 million compared to $23 million in the prior-year quarter, primarily reflecting higher sales volume, lower commodities costs, and improved product sales mix, partially offset by a $3 million increase in a reserve for obsolete inventory balances associated with military programs. Absent this charge, margins improved year over year.CORPORATE AND OTHERIn the second quarter, corporate and other expenses totaled $16 million compared to $7 million in the prior-year quarter, reflecting increased pension expense. The tax rate for the quarter was 19.4 percent compared to 35.3 percent in the prior-year quarter, reflecting the favorable settlement of the IRS audit of the company's FY09 and FY10 tax returns. Interest expense was $18 million compared to $24 million in the prior-year quarter, reflecting lower rates and borrowings compared to the prior year. Year-to-date free cash flow use was $73 million compared to a use of $68 million in the prior-year period (see reconciliation table for details). The higher use reflects pension contributions of approximately $140 million compared to $62 million in the prior-year quarter, partially offset by working capital improvements including a $51 million collection of a long-term outstanding receivable. Year-to-date capital expenditures were $40 million compared to $74 million in the prior year, down $34 million, primarily due to the completion of the Aircraft Commercial Center of Excellence facility in the second quarter of the prior year.As previously announced, ATK exercised its right to call its $400 million, 6.75% notes maturing in 2016 (the "6.75% Notes"). Calling those notes resulted in debt extinguishment charges of approximately $12 million, reflected in ATK's results for the second quarter. In conjunction with the above, ATK partially financed the call by increasing its Senior Secured Term Loan A borrowings by $200 million. The balance of the redemption was paid from available cash. This action further improved ATK's balance sheet and will increase future earnings per share by reducing interest expense.OUTLOOKATK is also raising its full-year FY13 sales guidance to a range of approximately $4.1 to $4.2 billion, up from previous guidance of $4.05 to $4.15 billion. Full-year FY13 EPS guidance is now $7.40 to $7.70, up from previous guidance of $7.00 to $7.30, reflecting the higher sales expectations as well as improved expectations around the company's FY13 tax rate. Full-year FY13 free cash flow guidance is now in the range of $175 to $200 million, up from $140 to $165 million (see reconciliation table for details), reflecting improved working capital offset by the cash flow impacts of the near-term forecasted pension contributions as a result of the Moving Ahead for Progress in the 21st Century Act. "ATK increased its full-year FY13 guidance given the strength of the Defense and Sporting Groups' year-to-date sales, as well as our increased confidence across the company's portfolio," said Neal Cohen, Executive Vice President and Chief Financial Officer of ATK. The effective tax rate for the year is now expected to be approximately 30 percent, down from previous expectations of approximately 32 percent. The lower tax rate, which anticipates the retroactive extension of the Federal R&D tax credit, is primarily the result of increased tax benefits from the Domestic Manufacturing Deduction due to changes in the planned pension funding.Reconciliation of Non-GAAP Financial MeasuresSales, Margins, and Earnings Per ShareThe Sales, Margins, and Earnings Per Share (EPS) excluding the results of Radford, the prior-year favorable contract resolution, tax settlement, and early extinguishment of debt are non-GAAP financial measures that ATK defines as Sales, Margins, and EPS excluding the impact of these items. ATK management is presenting these measures so a reader may compare Sales, Margin and EPS excluding these items as the measures provide investors with an important perspective on the operating results of the Company. ATK management uses these measurements internally to assess business performance and ATK's definition may differ from those used by other companies.Total ATK for the Quarter EndingSeptember 30, 2012:SalesEBITMarginLoss on Extinguishment of DebtTaxesAfter-taxEPSAs reported$1,069,787$110,55710.3%$11,773$15,640$65,061$2.00Radford(1,590)(925)(361)(564)(0.02)Early debt extinguishment(11,773)4,5917,1820.22Tax settlement11,123(11,123)(0.34)As adjusted$1,068,197$109,63210.3%$0$30,993$60,556$1.86October 2, 2011:SalesEBITMarginLoss on Extinguishment of DebtTaxesAfter-taxEPSAs reported$1,109,418$147,40613.3%$0$43,677$79,991$2.43Radford(49,050)(9,450)(3,686)(5,764)(0.18)Contract resolution(17,975)(17,975)(7,010)(10,965)(0.33)As adjusted$1,042,393$119,98111.5%$0$32,981$63,262$1.92Defense Group for the Quarter EndingSeptember 30, 2012:SalesEBITMarginAs reported$484,133$64,54613.3%Radford(1,590)(925)As adjusted$482,543$63,62113.2%October 2, 2011:SalesEBITMarginAs reported$528,105$92,91117.6%Radford(49,050)(9,450)Contract resolution(17,975)(17,975)As adjusted$461,080$65,48614.2%Free Cash FlowFree cash flow is defined as cash provided by (used for) operating activities less capital expenditures. ATK management believes free cash flow provides investors with an important perspective on the cash available for debt repayment, cash dividends, share repurchases and acquisitions after making the capital investments required to support ongoing business operations. ATK management uses free cash flow internally to assess both business performance and overall liquidity.$ in thousandsSix Months Ended October 2, 2011Six Months Ended September 30, 2012Projected Year Ending March 31, 2013Cash used for/provided by operating activities$        5,814$     (32,788)$275,000?$300,000Capital expenditures(73,879)(40,182)~(100,000) Free cash flow$     (68,065)$     (72,970)$175,000?$200,000ATK is an aerospace, defense, and commercial products company with operations in 21 states, Puerto Rico, and internationally. News and information can be found on the Internet at www.atk.com. Certain information discussed in this press release constitutes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Although ATK believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. Forward-looking information is subject to certain risks, trends, and uncertainties that could cause actual results to differ materially from those projected. Among these factors are: assumptions related to the profitability of current commercial aerospace structures programs; uncertainties related to the development of NASA's new Space Launch System; demand for commercial and military ammunition; changes in governmental spending, budgetary policies, including the impacts of potential sequestration under the Budget Control Act of 2011, and product sourcing strategies; the company's competitive environment; risks inherent in the development and manufacture of advanced technology; risks associated with diversification into new markets; assumptions regarding the company's long-term growth strategy; assumptions regarding growth opportunities in international and commercial markets; increases in commodity costs, energy prices, and production costs; the terms and timing of awards and contracts; program performance; program terminations; changes in cost estimates related to relocation of facilities; the outcome of contingencies, including litigation and environmental remediation; actual pension asset returns and assumptions regarding future returns, discount rates and service costs; capital market volatility and corresponding assumptions related to the company's shares outstanding; the availability of capital market financing; changes to accounting standards; changes in tax rules or pronouncements; economic conditions; and the company's capital deployment strategy, including debt repayment, dividend payments, share repurchases, pension funding, mergers and acquisitions ? including the related costs and any integration thereof. ATK undertakes no obligation to update any forward-looking statements. For further information on factors that could impact ATK, and statements contained herein, please refer to ATK's most recent Annual Report on Form 10-K and any subsequent quarterly reports on Form 10-Q and current reports on Form 8-K filed with the U.S. Securities and Exchange Commission.ALLIANT TECHSYSTEMS INC.CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME(preliminary and unaudited)QUARTERS ENDEDSIX MONTHS ENDED(Amounts in thousands except per share data)September 30, 2012October 2, 2011September 30, 2012October 2, 2011Sales$1,069,787$1,109,418$2,152,089$2,184,673Cost of sales841,520848,1621,674,1991,678,193Gross profit228,267261,256477,890506,480Operating expenses:Research and development15,91414,88629,92127,088Selling39,60942,00680,13681,432General and administrative62,18756,958126,588120,014Income before interest, loss on extinguishment of debt, income taxes, and noncontrolling interest110,557147,406241,245277,946Interest expense(18,098)(23,698)(37,913)(50,150)Interest income12377187229Loss on extinguishment of debt(11,773)-(11,773)-Income before income taxes and noncontrolling interest80,809123,785191,746228,025Income tax provision15,64043,67755,63776,223Net income 65,16980,108136,109151,802Less net income attributable to noncontrolling interest108117220294Net income attributable to Alliant Techsystems Inc.$65,061$79,991$135,889$151,508Alliant Techsystems Inc.'s earnings per common share:Basic$2.01$2.45$4.18$4.59Diluted2.002.434.164.55    Cash dividends paid per share0.200.200.200.20Alliant Techsystems Inc.'s weighted-average number of common shares outstanding:Basic32,40632,69832,51933,028Diluted32,59132,86532,68533,265Net Income (from above)65,16980,108136,109151,802Other comprehensive income(loss), net of tax:Pension and other postretirement benefit liabilities:Reclassification of prior service (credit) costs for pension and postretirement benefit plans recorded to net income (loss), net of tax (expense) benefit of $841, $844, $1,683, and $1,688(1,352)(1,346)   (2,703)   (2,693)Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net income (loss), net of tax benefit of $(12,297), $(9,569), $(24,619), and $(19,136)19,50115,15839,041   30,317Valuation adjustment for pension and postretirement benefit plans, net of tax benefit of $0, $0, $(732), and $0  --1,268  -Change in fair value of derivatives, net of income taxes of $(1,971), $19,136, $847, and $24,370, respectively3,073(29,931)(1,334)(38,117)Change in fair value of available-for-sale securities, net of income taxes of $91, $29, $148, and $(26), respectively(142)(46)(232)41Total other comprehensive income(loss)$21,080$(16,165)$36,040$(10,452)Comprehensive income86,24963,943172,149141,350Less comprehensive income attributable to noncontrolling interest108117 220 294Comprehensive income attributable to Alliant Techsystems Inc.$86,141$63,826 $ 171,929$ 141,056ALLIANT TECHSYSTEMS INCCONDENSED CONSOLIDATED BALANCE SHEETS(preliminary and unaudited)(Amounts in thousands except share data)September 30, 2012March 31, 2012ASSETSCurrent assets:     Cash and cash equivalents$237,343$568,813     Net receivables1,054,8361,029,155     Net inventories298,597258,495     Deferred income tax assets106,073101,720     Other current assets51,53851,512          Total current assets1,748,3872,009,695Net property, plant, and equipment578,380604,498Goodwill1,251,5361,251,536Noncurrent deferred income tax assets113,031134,719Deferred charges and other non?current assets460,089541,298          Total assets$4,151,423$4,541,746LIABILITIES AND EQUITYCurrent liabilities:Current portion of long-term debt$50,000$30,000     Accounts payable202,621333,980     Contract advances and allowances118,005119,824     Accrued compensation103,860121,901     Accrued income taxes2,2436,433     Other accrued liabilities262,983307,642          Total current liabilities739,712919,780Long?term debt1,045,3801,272,002Postretirement and postemployment benefits liabilities106,318111,392Accrued pension liability753,786878,819Other long?term liabilities127,606123,002          Total liabilities$2,772,802$3,304,995Commitments and contingenciesCommon stock?$.01 par value:     Authorized?180,000,000 shares     Issued and outstanding?32,667,162 shares at September 30, 2012 and 33,142,408 shares at March 31, 2012327332Additional paid?in?capital544,364537,921Retained earnings2,364,5362,241,711Accumulated other comprehensive loss(874,558)(910,598)Common stock in treasury, at cost? 8,888,287 shares held at September 30, 2012 and 8,413,041 shares held at March 31, 2012(666,224)(642,571)          Total Alliant Techsystems Inc. stockholders' equity1,368,4451,226,795Noncontrolling interest10,1769,956          Total equity1,378,6211,236,751          Total liabilities and equity$4,151,423$4,541,746ALLIANT TECHSYSTEMS INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(preliminary and unaudited)SIX MONTHS ENDED(Amounts in thousands)September 30, 2012October 2, 2011Operating activitiesNet income$136,109$151,802Adjustments to net income to arrive at cash used for operating activities:Depreciation52,51844,218Amortization of intangible assets 5,7355,573Amortization of debt discount3,3789,029Amortization of deferred financing costs1,9792,742Deferred income taxes(5,330)(3,915)Loss on Extinguishment of debt11,773-Loss (gain) on disposal of property576(4,941)Share-based plans expense6,4376,084Excess tax benefits from share-based plans-(23)Changes in assets and liabilities:Net receivables45,251(150,910)Net inventories(40,102)(86,787)Accounts payable(118,345)935Contract advances and allowances(1,818)(9,711)Accrued compensation(19,965)(30,723)Accrued income taxes2,18131,698Pension and other postretirement benefits(68,833)(3,832)Other assets and liabilities(44,332)44,575Cash (used for) provided by operating activities(32,788)5,814Investing activitiesCapital expenditures(40,182)(73,879)Proceeds from the disposition of property, plant, and equipment197,310Cash used for investing activities(40,163)(66,569)Financing activitiesPayments made on bank debt(10,000)(10,000)Payments made to extinguish debt(409,000)(299,997)Proceeds from issuance of long-term debt 200,000-Payments made for debt issue costs(1,458)-Purchase of treasury shares(24,997)(49,991)Dividends paid(13,064)(13,328)Proceeds from employee stock compensation plans-2,545        Excess tax benefits from share-based plans-23Cash used for financing activities(258,519)(370,748)Decrease in cash and cash equivalents(331,470)(431,503)Cash and cash equivalents - beginning of period568,813702,274Cash and cash equivalents - end of period$237,343$270,771Media Contact: Investor Contact:Amanda Covington Steve WoldPhone: 703-412-3231 Phone: 952-351-3056E-mail: amanda.covington@atk.comE-mail: steve.wold@atk.comSOURCE ATK